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Oil prices drop on dollar strength, hopes of rise in OPEC+ supply

Brent crude futures for April, which expire on Friday, fell 74 cents, or 1.1%, to $66.14 a barrel

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Oil Prices | US Dollar | OPEC


Reuters  | 
NEW YORK 

By Jessica Resnick-Ault

NEW YORK (Reuters) – Oil prices fell on Friday as the U.S. dollar rose while forecasts called for crude supply to rise in response to prices climbing above pre-pandemic levels.

Brent crude futures for April, which expire on Friday, fell 74 cents, or 1.1%, to $66.14 a barrel by 12:45 EDT (17:45 GMT). The more actively traded May contract slipped by $1.08 to $65.03.

U.S. West Texas Intermediate (WTI) crude futures dropped $1.42, or 2.2%, to $62.11. The contract was still on track to be up 4.8% on the week.

The U.S. dollar rose as U.S. government bond yields held near one-year highs, making dollar-priced oil more expensive for holders of other currencies.

“It’s a dicey time – it doesn’t seem like a time to load up on a risk-asset position,” said Bob Yawger, director of Energy Futures at Mizuho in New York, wary of a potential output increase from OPEC and allies at next week’s meeting. Also, the U.S. stockpile report this week showed a surprise build in oil inventories.

Friday’s gains also reflect profit-taking after both Brent and WTI headed towards monthly gains of about 20% on supply disruptions in the United States and optimism over demand recovery on the back of COVID-19 vaccination programmes.

Investors are betting that next week’s meeting of the Organization of the Petroleum Exporting Countries (OPEC) and allies, a group known as OPEC+, will result in more supply returning to the market.

U.S. crude production fell in December, the latest month for which data is available, according to a monthly report from the Energy Information Administration.

Despite talk of tightening fundamentals, the demand side of the market is nowhere near warranting current oil price leves, they added.

U.S. crude prices also face pressure from slower refinery demand after several Gulf Coast facilities were shuttered during the winter storm last week.

Refining capacity of about 4 million barrels per day (bpd) remains shut and it could take until March 5 for all capacity to resume, though there is risk of delays, analysts at J.P. Morgan said in a note this week.

(Reporting by Shadia Nasralla, Additional reporting by Sonali Paul in Melbourne and Koustav Samanta in Singapore; Editing by David Goodman, Louise Heavens and David Gregorio)

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

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